Goldman Sachs Gives Facebook Stock PT Boost of $37 Ahead of Q3 Results

Goldman Sachs Gives Facebook Stock PT Boost of $37 Ahead of Q3 Results
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Goldman Sachs Gives Facebook Stock PT Boost of $37 Ahead of Q3 Results

Facebook Inc (NASDAQ:FB) has a received a rare boost in its stock price ahead of its Q3 earnings results announcement, scheduled for October 23, from Goldman Sachs Group, Inc. (NYSE:GS). Several analysts have recently lowered their price targets on the social networking giant, albeit maintaining a buy rating on the stock. The social media giant has been unveiling projects directed towards boosting its earnings, including plans for a search engine, sponsored stories, promoted posts, eCommerce service dubbed Facebook gift service, and targeted custom ads. Nonetheless, the Internet technology company has seen its stock price plunge 50% from its IPO price of $38, currently trading at a market price of $19 per share at the Nasdaq (NASDAQ) stock exchange.

The equity research and brokerage firm expects Facebook Inc (NASDAQ:FB) to record $1.27 billion worth of revenue for the December quarter, with ad revenue growing by 8% qoq, and 35% yoy, which is above the consensus estimate of 4% and 30% respectively.

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Goldman Sachs Gives Facebook Stock PT Boost of $37 Ahead of Q3 Results

Goldman Sachs estimates for the September quarter are in line with the consensus estimates, with revenues expected to rise by 12% qoq, to $1.184 billion, as compared to the decline of 6% registered during the June quarter. Ad revenue is estimated to grow by 14%, while payments revenue will grow by 3%. The EPS will be $0.12, while non-GAAP EBIT is expected to stand at $515 million up from last quarter’s figure of $484 million.

The analysts expect Facebook Inc (NASDAQ:FB) to provide C4Q12 or F3Q12 guidance of $1,074 in Ad revenue as compared to a consensus $1,037 billion. However, Goldman’s expectation for the social networking company Payments revenue falls short of the consensus estimate at $198 million, as compared to $210 million. The Worldwide monthly active users are level with the consensus estimates at 1.014 billion, but the daily figure falls short, at 586 million, as compared to 588 million.

The earnings per share for Goldman Sachs analysts is at $0.12, slightly higher than the street figure of $0.11 per share. Interestingly, the Street estimates that Facebook Inc (NASDAQ:FB) non-GAAP EBIT will decline by 2% qoq, for the December quarter to $505 million, as compared to Goldman Sachs estimate of 1% increase to $523 million.

The equity research and brokerage firm attributes its below street payments revenue estimate to the fact that, Zynga Inc (NASDAQ:ZNGA) has already signalled revenue warnings for the C3Q12 results. On the other hand, the firm is predicting a strong growth in Ad revenue for the December quarter, citing robust progress in the social media company’s sponsored stories monetization campaign.

The analysts said, “we estimate in-stream Sponsored Stories could potentially add up to $300-450mn in ad revenue in 3Q2012, much higher than many investors are expecting”. Nonetheless, the analysts do cite caution over the company’s stock with regard to risk saying, “with two lockup restrictions being released in November and December, we expect the stock to remain volatile through the end of the year.”

“That said, we believe the key to the stocking working in 2013 in many investors’ minds, is whether ad revenue growth can re-accelerate next year. In our view, ad revenue growth acceleration in 2013 is highly probable,” the analysts added in view of stable ad revenue growth originating from sponsored stories, and Facebook ad exchange (targeted custom ads).

The analysts from the firm have placed a Buy rating on Facebook Inc (NASDAQ:FB) stock, and a price target of $37 per share, which is just shy of the offer price to be achieved within the next twelve months.

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